Computer models and stock screens should generate fresh ideas.  We are often surprised by the rankings from our TCA-ETF model, which combines attention to Trend, recognition of Cycles, and a touch of Anticipation.  While the factors are technical, it is always interesting to compare the results with fundamental metrics and prevailing analyst viewpoints.  (For new readers, there is a further explanation of our approach at the end of the article.)

Despite the general weakness in the market, some sectors have performed well and even gained strength in the rankings.  There have also been dramatic collapses, including the dollar weakness plays like gold.  These ETF's led the rankings only a few weeks ago.

Dow Jones U.S. Consumer Services Sector Index Fund (IYC)

Given the current economic weakness and skepticism about the consumer, there is a surprise near the top of the rankings:  the iShares Dow Jones U.S. Consumer Services Sector Index Fund (IYC).  The fund  includes all of the big retail names you know:  Wal-Mart  (WMT),  McDonald's Corp.  (MCD),  The Walt Disney Co.  (DIS), Home Depot (HD), and others.

The overall P/E ratio is under 18 and the beta is only .85.  Despite the inclusion of the big names, the overall diversification is good with a variety of retail offerings.  The top ten holdings represent only about 40% of the fund value.

IYC is down about 11% YTD, but has shown strength over the last month. Terry Woo at Minyanville observes that tax rebate checks helped the group, especially Wal-Mart, which reported a 17% rise in earnings and raised its forecast for the entire year.  Larry Shutts, writing at Blogging Stocks, also notes a bullish channel for Wal-Mart.  McDonald's has also moved significantly off of a low price in July.

There has been little comment from our regular ETF sources on IYC.  This may reflect the continuing negative sentiment on the consumer and a suspicion that the rebate stimulus will ebb over the rest of the year. 

Weekly TCA-ETF Rankings

This week's report of rankings is based upon Thursday's closing prices, and our Friday trades are not included.

The fraction of sectors in the "penalty box" has moved higher, reflecting deterioration in the overall picture.